Here's the Deal - October 27, 2024

Economy: In Slowdown

Market Cycle: Bullish

_{Week 43 of 52 for 2024: 83% of the way through 2024}

Weekly Note:

It may be a week of spooky scenes and flashy costumes, but the real thriller is the economy's continued strength and resilience.

This past week shed new light on the economy's position, confirming much of what we've forecasted here. The insights aren't surprising, given that the predictions are rooted in data trends shaped over eight decades of credit cycles.

In a notable update, the International Monetary Fund (IMF) upgraded its growth outlook for the U.S., citing recent surges in investments in infrastructure, near-shoring, and chip manufacturing—along with a powerful consumer spending trend. Despite ongoing complaints about high prices, consumers continue to spend far outside of their basic necessities. In the real world, actions speak louder than words. Reminding us once again that consumer behavior, not sentiment, tells the real story.

Even UPS delivered a strong quarter. That’s right, the same company that for years blamed economic conditions for their struggles while their competitors thrived posted solid numbers and beat expectations. Signaling that goods continue to move across the country. And when goods are in transit, they're being bought. This cycle of consumption underlines the strength of the economy, as the more we all consume, the more the economy grows. As it is clearly continuing to do.

Speaking of earnings, results so far this earnings season have been impressive. As of October 22nd, 76% of companies which reported beat their earnings estimates, indicating broad-based strength. Even automakers outperformed expectations last quarter, with GM posting strong results and Tesla showing a notable jump in profit margins and a substantial increase in free cash flow from Q2 to Q3.

Adding further weight to this momentum, home foreclosures remain at historic lows, while outright home-ownership continues to rise. A clear testament to economic resilience.

These results drive a dagger into the heart of the recurring, and unfounded, recession calls of the past two years. After incorrect claims that the U.S. was in recession in Q3 of both 2022 and 2023, those continuing to push this false narrative seem more determined to sell you unsubstantiated anxiety than educate.

Oh, “but all the growth is coming from corporations and stifling small businesses”, they tell us. The small business sector is supposedly collapsing and in shambles.

Sure, things have been more difficult than they were when the economy was in the midst of the longest period of growth in history in the years preceding the pandemic.

However, this did not justify the calls of a supposed collapse of the small business sector. A rallying cry for the past few years when economic data was confirming an economy in it’s best and safest period.

Time for those folks to get real, as the data tells a different story.

Not only do Job openings remain strong, but most are from the small business sector. While there may be fewer corporate job openings, small business demand for workers remains higher than the already elevated pre-COVID levels. This demand for workers is a powerful indicator that, far from crumbling, the small business sector continues to adapt and push forward.

However, the biggest news this week is by far the fact that TSMC’s new chip plant in AZ is already pumping out more chips than their headquarters in Taiwan. This is massive not only for the US economy, but also for US security and future growth.

But it ain’t all rainbows and butterflies as the continued surge of the bond yields and mortgage rates has dampened refi and housing demand.

The current predicament as of Oct 27th, 2024 isn’t a weak economy. It’s actually the opposite, as in a strong economy with an elevated inflation rate. Which is why you hear people with the best track records, like Paul Tudor-Jones, say “All roads lead to inflation.”

Hopefully that will not be the case until the next cycle as it would throw the economy into a state of flux. Should that happen, then we’ll really have something to cry about.

The coming week brings a lot of economic info our way. Part of which will be monthly employment information which could be briefly affected negatively by the turmoil at Boeing. Keep that in mind if the data is worse than expected.

Speaking of the many woes of Boeing, they are also now reportedly considering putting their space division up for sale. WOW! This is a monumental fall from a once great company. The fall is magnified due to the severe hit it causes to the US’s defensive capabilities.

As if that isn’t enough from the week…

Stanley Drunkenmiller pointed out that Markets are positioning themselves for a Trump win. He’s one of those you absolutely want to listen to when they speak as he is in the prime of his career and seeing markets better than most right now.

After diving into his theory, I tend to agree with him. A position I did not have until after he stated such and I had a chance to verify through my work.

This coincides with PTJ’s statement that “all roads lead to inflation.”

Part of the theory is that a Trump win would continue to drive up bond yields, which already appears to be happening. This impacts the housing trade thesis posted a couple weeks ago.

So look for an update to that opportunity if you are involved or just following along. Spoiler alert, it doesn’t change the theory, but it could very well delay and minimize the upside potential. However, I’m sticking with it now.

Combine all of that with the weak being the busiest one of earnings season, the presidential election next week, plus the beginning of the best six months for the stock markets historically; and the next couple weeks are going to be interesting.

Don’t let it get to you, we’ve been through much worse. It’s up to you if you come out the other side stronger or allow it to impede your progress to your goals.

Top Economic Stories of the Week:

Empty Tables and Rising Costs Push More Restaurants Into Bankruptcy

Why it Matters: When generational shifts happen in the economy, there are always a few sectors that take it worse than others due to changing dynamics. It isn’t a surprise that this is one due to the surge in the cost of food the last few years.

Private Markets Are Reserved for the Rich. Should a Test Let You in?

Why it matters: Definitely not a headline you see in the middle of a recession. Lol

Retail Space Is Going Fast and Pushing Out Local Shops

Why it matters: Another one of those things you don’t see in a recession.

Applications to M.B.A. Programs Soar

Why it matters: This is interesting and will be something to keep an eye on as a possible trend, as recessions typically lead to more people go back to school.

ASML’s Plunge Shows the Diverging Fortunes of Chipmakers From AI

Why it matters: It seems that the divergence between the stronger and more mediocre chip manufacturers is beginning. Which means traders and investors need to be more diligent in choosing from the sector. The good news is that the money not going into mediocre chips will instead go to other growing sectors. In markets, 95% of the time money doesn’t simply evaporate causing a market crash. Instead it finds other more suitable plays for the coming months. The result of which leads to more gains for those that spend their time finding the winners rather than crying about it online and to their friends.

Simple Economic Explanations Keep Breaking Down. Here’s Why.

Why it matters: The truth is, those things mentioned in the article are merely pieces of the puzzle. They are easier to understand, which makes them easy tools of manipulation by grifters knowingly or unknowingly selling you, the unsuspecting mark, misleading information brought upon by their lazy half-assed analysis. In my experience, this is indicative of most economic pontificators.

Most Important Data Drops from the Past Week:

This Week in Markets

Now that we know that markets are pricing in a Trump win, what does that mean for markets until and then after the election?

If you read this question and immediately think “market crash,” then please proceed to go outside and flog yourself until your morale improves. If that doesn’t help, maybe go talk to a professional to seek the answer to why you only see negative outcomes in life. Lol, but I’m only half joking.

Nothing unusual or unexpected out of markets at this moment. While the action of late last week indicates some short term downside pressure along with a rising wedge that everyone and their brother notices, these bearish patterns typically prove to be fantastic buy opportunities in bull markets.

Several positions and individual names I’m watching are coming into support or remaining at elevated levels after big moves higher. More importantly, way more higher highs and higher lows on the weekly charts.

Scientifically speaking, this is Bullish AF.

I’d take any weakness as an opportunity to buy.

You damn sure want to expect higher markets into the end of the year, because that’s what the overwhelming weight of the evidence tells us to expect. Fighting this trend right now is like climbing Everest and then pissing into the wind because you have a feeling that doing so would create a new majestic waterfall. Or like choosing to double down on a deuce - three while the dealer is showing an Ace.

If you want to give your money away that badly, send me an email and I’ll send you my Venmo. That way you can just give it to me instead of mindlessly shorting this market for anything other than a short-term move. I’ll be doing you a favor as it will save you both time and aggravation. You’re welcome.

The Week Ahead

Economic Data to watch:

Earnings to watch:

WTF of the Week

WHAT?!?! You mean to tell me that Trump never applied for a job at McDonald’s and only worked there for a photo opp and news story while campaigning to be President of the United States?!?!

Well I never, in all of my 44 years, have ever heard of such a thing.

Good thing the Legacy Media was all over this one to bring us the facts.

Quote of the Week

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